A New Era in Airline Loyalty (Featured in Loyalty360)

Editor’s Note: This article was featured in Loyalty Management Magazine by Loyalty360 (July- September Issue), contributed by Shubhodeep Pal, Senior Innovation Officer at SimpliFlying. For a soft copy of the original article, please see here.

There’s a fundamental shift underway.

Whereas traditional airline loyalty programs were essentially intended to reward those already loyal—by dint of them being frequent flyers for various reasons—we’re now seeing airlines explore a truer meaning of loyalty, in terms of making those who travel loyal.

Think about it: traditional loyalty programs typically reward only those who are already flying like crazy (one free ticket typically requires at least 25,000 frequent flyer miles). In such a scenario, an occasional flyer might join the loyalty program as a formality (or even, to be fair, for some trivial boarding pass privileges) but no real hope of ever redeeming more than a couple of tickets in his/her lifetime. Today, however, airlines are keenly aware that loyalty, or rather, affinity, can be inculcated even in those not flying frequently.

A Welcome Shift in Philosophy

It is no longer news that there has been a paradigm shift in the market. Information, opinions and candid product reviews can be shared easily on social networks. This has made many airlines realize the immense underlying potential. Engaging customers, empowering them to be social advocates, and subsequently mining social data born out of online interactions could help promote and increase loyalty to the brand. Forget the days of yore. Even airlines with traditional loyalty programs have started toying with the idea of driving loyalty by engaging customers online. Offering real-world rewards for virtual actions creates brand champions: People who think highly of the brand and are willing to gladly promote and recommend it. American Airlines, for example, recognized the need to have a critical mass to engage online. Hence, in their Mystery Miles contest last year they invited people to “like” their Facebook page and walk away with anything from 100 to 100,000 miles for the AAdvantage loyalty program. While the first two weeks since the inception of the Facebook Page had seen fans grow to more than 2000 in number, this campaign saw fan numbers gallop to over the 200,000 mark in just over 50 hours!

Compare this to the past where the airline brand was tightly controlled and all decisions were essentially one-way traffic thrust upon a consumer hardly able to effect any changes or improvements nor considered worthy of being a part of the process. Today, loyalty comes with the price of proactively engaging customers and including them in the decision-making process.

Gamification and the Virtual Ecosystem

The most relevant example of such a shift is seen in BalticMiles’ recent effort—the World’s First such initiative—to create the world’s first crowdsourced loyalty tier. Through a Facebook app called Brainstorm, BalticMiles invites members to suggest partners for the scheme as well as the benefits they’d wish to receive in that tier. Suggestions with the most ‘likes’ will translate to mileage points for members, who will be invited to help develop their ideas with the BalticMiles team. With 14 days still remaining in the month-long campaign, already 380 ideas have poured in, with 13 receiving over 100 likes each. For a sphere of airline activity that used to be tightly controlled by the airline, this marks a surprising (and welcome) change from how loyalty executives are now thinking.

“There is a lot of untapped creativity out there that can help a company further its business goals,” says Shashank Nigam, CEO of SimpliFlying. “BalticMiles recognizes this potential to drive meaningful conversations with its customers and we are excited to have helped them with the creation of the world’s first crowdsourced membership level.” At its essence, this is what gamification for driving business goals is all about. What is a game after all? A fun activity with the some inherent rewards for those participating in it.

Witness the success of Estonian Air’s social loyalty Facebook app AirScore (again the first initiative of its sort in the world). The app rewards virtual advocacy (eg. writing a review, sharing photographs) with points that can be redeemed for real-world rewards. Contrast this to the traditional mode of loyalty points (or miles) redemption that typically involves redeeming a flight in exchange for collected miles. Here, in a diagonally opposite move, customers fly in order to redeem their rewards (eg. lounge access). For those who swear by numbers and measurement, the initiative was a dream come true. After it was launched, AirScore saw the activity and engagement on Estonian Air’s Facebook page scale dizzying heights.

Within 10 days of being launched, 1040 members enrolled as “Estonian Air Ambassadors”. Moreover, 1,340,000 wall impressions were received. In comparison, Estonian Air flies about 800,000 passengers a year! If you’re someone keen to think about this initiative’s monetary worth, here are some stats to impress you: given that 4.8 million impressions were served, this would translate to a value of $48,000 assuming a standard CPM (cost per 1000 impressions) rate of $10 CPM.

Viral acquisitions, by referral, amounted to 1,105 members, which would imply a value of $11,050 given a standard rate CPA (cost per action) of $10. Unique visitors numbered 87,000. Assuming a standard CPC (cost per click) rate of $.50, this amounts to a value of $43,500 in advertising spend. These dollar-values are what Estonian Air, in fact, didn’t have to spend.

Tracking Loyalty through Location-Based Apps

Allow me to put forth a rather flippant question: How do you know your pet dog is loyal to you? The simplest answer is that he’d return to your house even if he were let out for an evening stroll on his own. Do you have a favorite café you frequent with your colleagues? Is there a particular restaurant you always take your family to? Do you, to bring us back to the topic, always prefer to fly a particular airline? I can speak for myself and admit that the answer to all of these questions is yes. But, to flip over to the other side of the fence, let’s ask some questions a bit differently. Do the café and restaurant know that you frequent them? Does the airline (or airport) know you’ve been frequenting it? Even if the airline does, via its loyalty program, is it doing anything to personalize your experience or know you better in a way that compels you to pay for its product again?

KLM, which understood the need to do this very early, managed to drive loyalty through their popular KLM Surprise campaign. When passengers arrived at security checkpoints and gates, flight attendants would be there to greet them by name and give them a personalized gift—something that the passenger could use on his or her trip, or enjoy when they returned home.

All these gifts were carefully chosen after researching the passenger’s social profile (the passenger, of course, would be randomly identified via a tweet or check-in they might have made). For instance, a woman who was going hiking in Rome was given a watch that tracks distances and walking speed. Needless to say, this delighted passengers. Moreover, it is estimated that the initiative earned KLM over 1 million Twitter impressions.

Location-based services are perhaps best equipped to track loyalty in terms of repeat visits as well as social advocacy. Air New Zealand’s Foursquare Mayors initiative aimed to do precisely this—by rewarding Mayors (people with the most number of Foursquare check-ins) of certain terminals with free access to their Koru Lounges.

Across the Pacific, when Virgin America’s flights started operating from the brand-new Terminal 2 at San Francisco International Airport, plenty of virtual “check-ins” happened during its grand opening ceremony. This was because Virgin cleverly set up a social scavenger hunt for guests to discover T2’s innovative features, guided by Foursquare “check-ins”.

By virtually “checking-in” at various spots in the airport and announcing their presence on social networks such as Facebook and Twitter, participants earned badges redeemable for prizes. It was quite a sight to see grown men and women running around in a bid to see their names on the leaderboard set up in the main hall.

Needless to say, this is just the beginning of the evolution of a fascinating new landscape. As more airlines find value in driving loyalty via social initiatives, traditional loyalty programs themselves might get shaken up. While most airlines, for now, are keeping their social and traditional loyalty initiatives separate, Gabi Kool, the CEO of BalticMiles is optimistic that the future will be integrated. “I’m not fully convinced yet that a social loyalty program has to exist next to a regular loyalty program. I think they can very well be integrated.” That future, you may safely assume, is not far.

Li Guen

Li Guen heads the communications and marketing functions at SimpliFlying where she drives corporate branding efforts and industry research initiatives. Prior to this, Li Guen was at Weber Shandwick working with clients including Rolls-Royce, Changi Airport Group and P&G.In her free time, Li Guen likes trekking mountains in Asia. You can tweet her at @SimpliGuen or email her at guen@simpliflying.com.